America’s hospitals are supposed to be places where politics take a back seat to patient care.
But there is a growing question Tennesseans should be asking: When Washington gives hospitals a special federal benefit intended to help vulnerable patients, do taxpayers know where that money actually goes?
A recent op-ed in The Tennessean rightly highlighted the precarious nature of rural health care, but it missed a critical systemic issue: how a vital federal safety-net program – 340B – is being exploited by hospitals at the expense of the vulnerable people it was built to protect.
How the 340B program grew beyond its original purpose
The 340B Drug Pricing Program, an issue I’ve been writing about for well over a decade, was enacted by Congress in 1992. Its original intent was clear: require pharmaceutical
manufacturers to provide steep discounts on outpatient drugs to enable participating hospitals to subsidize care for financially vulnerable patients.
The program has since become enormous. In 2025, participating entities purchased approximately $100 billion in outpatient drugs through 340B. Yet, despite climbing profit margins and surging cash reserves at nonprofit health systems, there has been no corresponding rise in charity care spending.
Hospitals can profit from discounts with little public oversight
Instead, 340B has left behind its intended targeted mission and transformed into an unchecked corporate hospital mark-up program, ironically for “nonprofit” hospitals. These institutions leverage the program to buy medications at deep discounts – sometimes 50% off – and bill patients and insurers at full price, pocketing the difference.
The concern isn’t necessarily that hospitals receive discounts. The problem is what happens after they receive them. A hospital can purchase an eligible drug at a heavily discounted 340B price and receive reimbursement substantially above its acquisition cost. The resulting spread can become revenue for the hospital. And here’s the remarkable part: There is no general federal requirement that a hospital publicly account for how much it saves through 340B or demonstrate precisely how those savings are spent.
That should concern every taxpayer and patient. Once a hospital realizes the financial benefit from a discounted drug, those dollars don’t come with a GPS tracker. They enter the hospital’s broader financial operation, an operation that includes a vast array of programs and enterprises ranging from patient-centered treatments to the promotion of ideologies outside the practice of evidence-based medicine (and everything in between).
Taxpayers deserve to know where the money goes
While the 340B program does not provide earmarks directing hospitals’ 340B profits toward certain programs, it also does not prevent the profits from flowing into such initiatives as diversity, equity, and inclusion programs and controversial gender-related interventions.
If a hospital can use its 340B-generated financial benefits to hire additional administrators, expand an office devoted to DEI hiring, fund institutional “health equity” initiatives or support other programs unrelated to providing affordable medicine to vulnerable patients, then the public should be able to see that. Transparency and accountability matter.
Congress is considering options that would force more transparency. The Tax Exempt Hospital Transparency Act would mandate rigorous reporting, requiring 340B hospitals to publicly disclose the exact number of individuals served under the program and hospitals’ aggregate net 340B profits. This effort joins other major federal actions, including sweeping 340B reform proposals from Senate leaders and federal legislation such as the Rural 340B Access Act, all of which aim at demanding clear receipts from the hospital industry.
Reform efforts aim to bring greater transparency
A federal program designed to help vulnerable Tennesseans – and patients nationwide – should not operate on an honor system, especially as hospitals have embraced policies and politics that thrive in the shadows and undermine the quality of medicine. And Tennesseans should not have to take a hospital’s word for it when billions of dollars in drug discounts are at stake.
Lindsay Killen is a native Tennessean, a national health-policy expert and a senior fellow at the Beacon Center of Tennessee. Killen also serves as the chief strategy officer for Do No Harm.
This article originally appeared on Nashville Tennessean: 340B was built for patients, not hospital profit margins | Opinion
